Kinder Morgan Energy Partners, L.P. (KMP) announced plans to form a joint venture with Oklahoma-based companies Deeprock Energy Resources LLC and Mercuria Energy Trading. In this regard, Kinder Morgan will acquire a 50% stake in a crude oil storage plant for approximately $25 million.
The joint venture aims at increasing the Cushing-based storage unit’s existing capacity of 1 million barrels by 750,000 barrels with the addition of three new storage tanks. The newly constructed plants are expected to be put into service in third quarter 2011.
Per the terms of the agreement, Kinder Morgan will be utilizing Deeprock’s undeveloped acreage of 254 acres for potential expansions. Privately owned Deeprock Energy Resources will act as the construction manager and operator of the terminal, while international private company Mercuria will be the anchor tenant for the project over the next five years, with an extendable option.
Managements of the threesome remain highly enthusiastic about this promising venture. According to them, this project provides a strong dais for enhancing the key crude oil market and meeting its growing demand from customers in Cushing. The companies are looking forward to capitalize on the crude oil storage business opportunities in the coming months via various other deals.
Headquartered in Houston, Texas, Kinder Morgan is the largest independent owner and operator of petroleum-product pipelines in the U.S. The company operates in five segments: Products Pipelines, Natural Gas Pipelines, CO2, Terminals, and Trans Mountain.
We are maintaining our long-term Neutral recommendation on the stock.Kinder Morgan, which faces intense competition from peers such as Enterprise Products Partners (EPD), Enbridge Energy Partners (EEP) and Energy Transfer Equity (ETE), currently retains a Zacks #3 Rank (short-term Hold recommendation).
ENBRIDGE EGY PT (EEP): Free Stock Analysis Report
ENTERPRISE PROD (EPD): Free Stock Analysis Report
ENERGY TRAN EQT (ETE): Free Stock Analysis Report
KINDER MORG ENG (KMP): Free Stock Analysis Report
Zacks Investment Research
